Medicare is delaying a full crackdown on private health plans

The Biden administration finalized new rules on Friday designed to cut spending widespread overbilling by private Medicare Advantage insurance plans, but then softened the approach intensive lobbying by the industry.

Regulators are still moving forward with rules that will reduce payments to insurers by billions of dollars a year. But they will implement the changes gradually over three years, rather than all at once, and that will lessen the immediate effects.

In the short term, private health plans may still receive payments that Medicare officials deem inappropriate. The system will eventually eliminate the extra funds insurers receive for covering patients with fewer than 2,000 diagnoses, including 75 who appear to be the subject of widespread manipulation.

But the extended timetable could also allay concerns from health plans, doctors and others that the broad policy change could lead to unintended consequences, such as increases in premiums or reductions in benefits for Medicare Advantage beneficiaries.

In the two months since the proposal went public, insurers and their allies had mounted an expensive, loud lobbying campaign, using TV commercials, pressuring lawmakers on Capitol Hill and calling on thousands to submit opposing comments.

The nation’s top Medicare official acknowledged Friday that industry outrage has influenced the shape of the new rules.

“We felt very comfortable with our policies, but we always want to hear what stakeholders have to say,” said Chiquita Brooks-LaSure, the administrator of the Centers for Medicare and Medicaid Services. She said the desire for slower policy change “was something we really heard from our comments, and we wanted to respond.”

The new payment formula comes in response to mounting evidence over more than a decade that private insurers have exploited a formula to coerce overpayments from the federal government. Plans qualify for additional payments for patients whose illnesses could be more expensive to cover, which has encouraged many to go to great lengths to diagnose their clients with as many health problems as possible. Insurers collect tens of billions of dollars annually in extra benefits, according to various estimates.

Nearly every major insurer in the program has settled or is facing federal fraud charges for such conduct. Evidence of the overpayments is documented by academic studies, government guard dog reports and schedule audits.

Despite the excesses and concerns that Medicare Advantage too often has denies needed careAbout half of all Medicare beneficiaries are now enrolled in the private plans, which receive government spending in excess of $400 billion annually. It remains popular with consumers, who often enjoy lower premiums and benefits — such as vision and dental services — that the government’s basic Medicare plan doesn’t offer.

The program has also become profitable for the largest insurance companies. Recent research of the Kaiser Family Foundation found that insurers make about double the gross margins with Medicare plans that they make with their other industries. Humana recently announced it would stop offering commercial insurance to focus on Medicare, which serves older and disabled Americans, and Medicaid, which primarily serves low-income people.

The new rule will eventually eliminate the extra payments for many diagnoses that Medicare Advantage plans frequently reported, but which Medicare data did not show were associated with more medical care. Those diagnosis codes included a few that specifically targeted private plans, such as diabetes “with complications” and a form of severe malnutrition typically seen in famine-stricken countries.

With the three-year phase-in, insurers will receive payments based on one-third of the new formula in the first year and two-thirds on the old one. Overall, Medicare estimates that Medicare Advantage plans will pay out 3.32 percent more next year than they did this year. Under the original limits proposed by the administration, that increase would have been about 1 percent. Previous changes to the payment model have also lasted three years.

The policy’s opponents have argued that the change could erode benefits for the plans’ customers and have a disproportionate effect on poor and minority populations. The slower rollout hasn’t softened them.

“While we appreciate that CMS has moved to a phased approach, the underlying policy is fundamentally unchanged,” he said Mary Beth Donahue, the president of the Better Medicare Alliance, an industry group that spent eight figures on television advertising to fight the policy. We remain concerned about the unintended consequences of this risk adjustment policy for seniors.”

But the Alliance of Community Health Plans, a group representing not-for-profit insurers, said in a statement that it endorsed the new approach: “We support the changes to the risk adjustment model to focus on delivering outcomes for consumers and address underlying incentives. to aggressively tackle documentation. ”

Insurers have often challenged the agency’s Medicare actions in court, but it’s unclear whether insurers will challenge these policies.

Some lawyers and experts said they found the new formula too timid. The Medicare Payment Advisory Commission (MedPAC), which recommends policies to Congress, wrote in a comment letter that the proposed changes, while “directionally correct, are insufficient to address the magnitude of excess Medicare spending.”

Mark Miller, a former executive director at MedPAC, had urged Medicare to go even further than the original proposal. He is now Executive Vice President at Arnold Ventures, a policy and advocacy organization closely associated with a group that funded television advertisements defend the change. He described the final approach as a disappointment. “They’re essentially bowing to the plans,” he said in an email.

In February, a few weeks after their proposal was released, top health officials in the Biden administration vigorously defended the change. In a series of tweetHealth and Human Services Secretary Xavier Becerra characterized criticism of the policy as “disinformation being pushed out by well-paid industry hacks and their allies.” In an interview with The New York Times, Dr. Meena Seshamani, the top Medicare official, said she was determined to “hold the industry accountable for abusing the system.”

Ms. Brooks-LaSure’s comments Friday were more measured, highlighting “stakeholder” perspectives in the Medicare program. She said she didn’t feel Medicare was folding under pressure from the industry.

The payment change is one of a series of strict rules for the program recently proposed or finalized by the administration. Another proposal would tighten industry marketing scrutiny and make it more difficult for plans to deny care to patients. And a rule finalized in January, plans require the government to repay a larger share of the overpayments uncovered by audits.

While the Medicare Advantage program has long enjoyed strong bipartisan support on Capitol Hill, few leading lawmakers have come forward in this round to defend the plans, despite all the lobbying. Republicans on committees overseeing the programs wrote letters to Medicare officials with technical questions about the change, but avoided strong criticism of the policy. On Tuesday, 17 House Democrats sent a letter to Medicare officials asking them to delay, but not cancel, implementation.

Bill Cassidy of Louisiana, a physician who is the top Republican on the Senate Health, Education, Labor and Pensions Committee, and Senator Jeff Merkley, a Democrat from Oregon, introduced legislation on Tuesday that would take further steps to prevent “unreasonable payments, coding or diagnoses”.